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Local development x DX - the successes, failures and problems facing ‘municipal DX’.

2023/05/30Editors of Iolite

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The real content of municipal DX, which is hard to visualise

The real content of municipal DX, which is hard to visualise

Digital transformation, or DX, translates directly as ‘digital transformation’.

Although attention tends to focus only on the ‘digital’ part, the most important part is the ‘transformation’ using digital technology.

It is not only private companies that face this problem, but also local and regional administrations. What exactly is ‘municipal DX’ and what are local authorities doing about it, which is harder to visualise than in the private sector?

The promotion of digital transformation (DX) is a topic generally heard in the private sector. However, the same is also true for public administration and local governments, which are also struggling with this topic. Local governments in particular face a number of problems and challenges that are unique to them.

This promotion of DX by local governments is also known as ‘municipal DX’. What does this municipal DX mean in the first place?

Specifically, it is the use of digital technology and data to transform the administrative services of various public institutions and facilities, including local authorities, with the aim of contributing to local communities.

Indeed, by appropriately and efficiently collecting, managing, analysing and utilising data from each region, it is possible to provide more meaningful and comfortable administrative services to local residents. If the collected data is used as big data and AI is used for appropriate operations, it is certain that the convenience of residents will increase.

The successful use of digital technology and AI can also improve operational efficiency, improve services and allocate human resources to new services that have never existed before.

In 2020, the Ministry of Internal Affairs and Communications (MIC) announced the ‘Municipal DX Promotion Plan’ at the time of the Cabinet decision on the ‘Digital Government Action Plan’, and in 2021 the Digital Agency will take the lead in establishing a unified core business system called the ‘Gov-Cloud’ (Government Cloud).

If this goes ahead, local authorities across the country will be able to do multiple cloud services such as SaaS, IaaS and PaaS. Many operations can now be carried out on the web, reducing costs and increasing the speed of operations.

Above all, it is expected to make it easier for the national government and local authorities to collaborate with each other on data. There is a growing momentum to promote DX throughout the country.

The promotion of DX by local governments is a long-standing challenge, given the impending ‘wave of the times’ and ‘various social issues’.

Against this backdrop, the promotion of DX by local authorities in particular is being pressed by practical necessity.

According to the Ministry of Internal Affairs and Communications' “Changes in the number of staff in local governments”, the number of staff in local governments has been reduced by more than 400,000 over the past 20 years. The situation is such that there is a permanent shortage of staff, and improving the efficiency of administrative service operations has become an urgent issue.

This is also against the backdrop of the lack of cross-regional and inter-organisational data utilisation and collaboration that was highlighted in the response to the new coronavirus outbreak after 2020.

When the Fumio Kishida Government came to power in 2021, Prime Minister Kishida announced his policy statement that he would ‘promote digital implementation from the regions, create a new wave of change and close the gap between regions and cities’.

The Digital Agency, which was established before Kishida's inauguration, has responded to this by focusing on promoting the ‘three pillars’ of ‘realising the Digital Rural City State Concept through the development of digital infrastructure in rural areas’, ‘promoting data strategies’ and ‘strongly promoting the digitalisation of public administration’.

Although not widely recognised due to its rural location

There are many successful examples.

One specific example of DX promotion is the Saga Prefectural Government, which uses an AI chatbot for enquiries on the government website. The chatbots are installed on the ‘About new coronavirus infection’ and ‘Kyushu Saga International Airport’ pages, both of which allow users to make enquiries about coronavirus 24 hours a day.

Directly entering a question will display Q&A and other question examples, and other items can be selected by clicking or tapping on the item you want to look up. The Saga Prefectural Government is one of the few prefectures in Japan to have a DX Promotion Centre, which also provides support for improving the productivity and efficiency of operations in the prefecture. AI and IoT are also being incorporated into operations in government buildings.

Other examples include Ishikawa Prefecture's adoption of an electronic application system. This alone is a common story, but what makes Ishikawa Prefecture unique is that the staff themselves created the input form for the application using a special tool. The fact that the system was created by staff who normally carry out work for the local government has made the system well known for its ease of use among residents.

The system also enables identification by biometrics and PIN input, without the need to link a personal number card.

Takamatsu City in Kagawa Prefecture has established a ‘disaster prevention dashboard’ as a smart city initiative in the field of disaster prevention. Until now, it has been necessary to go to the trouble of dispatching officials to monitor frequently flooding rivers when heavy rainfall occurs.

However, by incorporating this dashboard, water level information can now always be checked in real time, improving staff working arrangements.

This water level information is also open data and can be checked by local residents at any time. Residents can easily check their safety and improve their quality of life, an improvement that is truly worthy of being called DX-isation.

If successful, services will improve, but if unsuccessful, they will worsen ‘DX is a fundamental reform that is also a double-edged sword’.

On the other hand, while specific examples are avoided, there are some municipalities where DX-isation has not progressed well. One of the main reasons for this may be related to the ‘strong analogue culture’.

Not only DX, but resistance to digitalisation in general among staff and managers will naturally stall the promotion of DX.

In addition, DX is essentially aimed at making major changes to systems and workflows. Therefore, if a municipality has a strong aversion to change, whether analogue or digital, it will be equally difficult to promote DX.

There may also be a fundamental lack of understanding of DX. Unlike private companies, which need to compete in the market, local authorities often do not need to actively adopt new technologies. As a result, there are cases where local authorities as a whole have little awareness or understanding of DX and ‘don't know what to do in the first place’.

There are also cases where there is an understanding and desire for DX itself, but no personnel familiar with IT and digital fields. There is no problem if the actual construction of specific equipment is left to the contractor.

However, if they lack digital and IT knowledge, they may not be able to formulate a DX policy because they do not have a clear image of what they can do and what kind of changes they can make. In such a situation, even a half-hearted attempt to promote DX will often result in failure.

Consultants and legacy systems further complicate the problems of DX promotion, and stand as additional barriers.

Particularly troublesome is the situation of a ‘consultant bubble’ in local development, which has been seen as a problem even before DX promotion. This was triggered by the Comprehensive Strategy for the Creation of Towns, People and Work, which was approved by the Cabinet in 2014.

The strategy introduced a large budget for local governments under the guise of ‘local development’, and local governments have successively commissioned consultants involved in local development to implement new initiatives using this budget.

This was spurred on by the fact that it has traditionally been a regular practice for municipalities to outsource work to consultants in the field of regional revitalisation.

In the first place, tenders for local government regional revitalisation have been held in many parts of the country. However, after these tenders are over, consultants who have succeeded in winning the tender often go to hear about successful local revitalisation projects in other regions. This reversed order of events has become the norm.

It is not difficult to imagine that people who have always run businesses in the region and have talent often develop their own businesses before the government moves on to local development. The very act of going to hearings after being entrusted with a project is questionable.

Many of these consultants are in fact amateurs and lack basic knowledge. Often, these consultants come up with project proposals that imitate the best practices they have heard about.

Local revitalisation cannot be successful unless the strategy is basically tailored to the local area. Bringing a degraded copy of a successful case study from somewhere else will naturally not guarantee success.

However, in the field of regional revitalisation, it is possible to make up a project itself using ‘subsidies’, which is why there is no end to the emergence of such consultants.

The same thing is also happening in municipal DX. In this case, local authorities are told to ‘promote DX’, but they are unknowledgeable about it, so they simply throw their policies to the consultants.

It is a matter of course that each municipality has its own circumstances and the needs of its residents, whether it is local development or DX promotion. It is obvious that it is unreasonable to entrust such matters to consultants from outside.

The main problem with such consultancy failures is the ‘mismatch of demands’. Each municipality has different workflows, different local circumstances and different demands from the local population. In order to renew operations and services using digital technology in this context, the people who have been working there until then need to be proactive in the change.

Local authorities need to work as a team, pooling their wisdom to solve problems and implementing them on their own, which is the key to successful DXing.

In particular, DX-isation differs from IT-isation, which only introduces tools, in that it reforms the system and the workflow itself. Because of this characteristic, the voices of people actually working in the field are more necessary than the opinions of consultants, who are objective third parties.

In addition, the fact that local governments are financed by taxes is not a small factor in these problems. In the private sector, if a company spends a large amount of money to promote DX, but the efficiency of its operations declines, the company's business will deteriorate significantly. If the working environment deteriorates in this way, the consultant will be held accountable.

However, local governments are not likely to go bankrupt, so if consultants are easy to deal with and listen to their requests for the time being, they tend to relax their pursuit of responsibility, thinking that they have somehow ‘promoted DX-isation’ and that it cannot be helped.

In essence, if DXing is carried out properly, the number of tasks in the workflow will be reduced and human resources will have more time to spare. It would also reduce the amount of work involved in public services, which would improve the overall quality of services and, in some cases, reduce service charges.

However, if DXing fails for various reasons such as these, the number of work tasks will rather increase, and this will often result in a decline in the quality of services. In fact, this phenomenon has been observed not only in local governments, but also in various private companies, including banks.

In addition, Japan has had a background of digitalisation and IT since the 1980s, which has in some cases hindered the current DX process, as the systems embedded in the early days of PCs and digitalisation have been used for many years with repeated modifications and improvements, resulting in systems that have become This is a problem that prevents bold, holistic renewal.

This is generally referred to as ‘legacy systemisation’: if DX is forcibly promoted and this legacy system is forcibly modified, existing computer systems will become black boxes and the data stored in them may not be utilised.

On the other hand, this legacy systemisation has long been seen as a problem, and the DX Report published by the Ministry of Economy, Trade and Industry in 2018 announced the possibility of an annual economic loss of 12 trillion yen from 2025 onwards if the legacy systemisation of Japan as a whole continues at this rate.

This is known as the ‘2025 cliff’, and the 2025 cliff issue triggered the spread of the term DX and its promotion in Japan. In some aspects, DX is necessary to solve the legacy systemisation problem, but the existence of legacy systems prevents DX from progressing, which is a kind of dilemma that the country is stuck in.

Overseas DX success stories

Finally, I would like to mention some success stories from overseas.

In Germany, the Digital Village Project, which uses digital technology to create ecosystems and local development solutions, was implemented between 2015 and 2019.

One of these projects is the Pocket Village. This aimed to revitalise local communities by working with news media and using an app that allows access to news about the digital village.

Residents can now connect with each other, and with the local authorities, via Pocket Villages on their smartphones and share information on local events, car carpooling, etc. The result is a global DX success story, with results for local economic development and the SDGs.